2/25/2010 @ 5:40PM

Palm Gets Pounded

On Thursday Palm updated its 2010 earnings guidance. The forecast was even weaker than analysts expected, and investors feared.

The Sunnyvale, Calif.-based maker of the Palm Pre, Treo and Centro smart phones said it now expects third-quarter sales to fall in the $285 million to $310 million range, a drastic reduction from its previously forecast sales range of $1.6 billion to $1.8 billion. Analysts polled by Thomson Reuters expect sales of $424.9 million. The company is scheduled to release its third-quarter earnings after the closing bell on March 18.

On news of the guidance reduction, shares of Palm dropped 19.3%, or $1.56, to $6.53 Thursday, falling to their lowest levels in 10 months.

(Full disclosure: Elevation Partners, which has a stake in Palm, is also a part-owner of our parent company Forbes Media.)

Palm products have struggled to compete against leading smart phones like
Apple’s
iPhone,
Research In Motion’s
Blackberry, and
Google
and
Nokia’s
Android.

On Tuesday Macquarie Research analyst Phil Cusick downgraded Palm, citing weak sales of the company’s products at
Verizon
and rising expenses from a recent promotional push. Verizon picked up the Palm Pre and Pixi Plus phones in late January, while
Sprint Nextel
has been selling those products since late 2009. Cusick lowered his price target on Palm shares to $4 from $10.

According to Cusick, other carriers aren’t going to jump in and help. “Our checks indicate that Sprint hasn’t seen any pickup since the Verizon launch. We expect AT&T to launch Pre and Pixi in April or May, but with even less marketing support than Verizon, and checks indicate that recent chatter of an impending launch at T-Mobile is not correct.”